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The current environment in USD has been extremely quiet, but look for that to change as monthly ranges are unusually small. There is still plenty of time to go, but barring any major moves monthly ranges are still historically low. This means traders need to approach the market with patience, but be alert as pent up price action won’t last forever. It looks as though the DXY wants to break down, but need confirmation first before running with that outlook. EUR/USD and GBP/USD are highest on the radar. So far this month, gold is in what is viewed as an unsustainable range.

Technical Highlights:

To check out our intermediate-term fundamental and technical outlook on major markets and currencies, see the DailyFX Trading Forecasts.

USD Index (DXY) looks headed for a breakdown, but need to wait

The US Dollar Index (DXY) has been in a brutally small trading range, and if it were to last through the end of the month, it would be as small any monthly range we’ve seen in recent years. The backdrop is being set for a sizable move, so traders need to be on their toes, but patient at the same time. Several support lines were recently broken, with the low at the end of August now under fire. A solid daily close below 94.43 could be enough to spark a run lower and finally open up the range.

US Dollar Index (DXY) 4-hr Chart (Breakdown soon?)

EUR/USD and GBP/USD favored longs on USD weakness

EUR/USD continues to press up against resistance in the low-11700s as it appears to strengthening within the choppy range. However, we must wait for a strong breakout to develop before moving forward with a strong long bias. In any event, with the range as small as it is a big move should soon be upon us.

EUR/USD Daily Chart (Pressing on resistance)

GBP/USD continues to trade higher but is challenging a bullish channel on the 4-hr chart. A the time of discussion this morning it was trading inside of it, but should it close outside of the channel with a big sell bar then it will at least neutralize the situation, if not shift momentum lower.

GBP/USD 4-hr Chart (Bullish channel)

Gold price monthly range sets it up for a move

The range in gold for September at under $25 is extremely tight and unsustainable. It appears likely we will see another move higher in-line with the reversal off the August low, but again, until we see price start showing a meaningful pick up in activity we will remain patient and sit on the sidelines for now.

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